German engineering firms 'fairly robust' even if banking shock intensifies - VDMA

By Christoph Steitz

FRANKFURT (Reuters) - German engineering firms, part of the country's industrial core, are closely monitoring shocks in the global banking sector but see themselves as well-prepared even if the situation deteriorates.

"Since the financial crisis in 2009, the German mechanical engineering sector has constantly increased its equity ratio, raised efficiencies and invested in production equipment and innovation," Bianca Illner of the VDMA engineering association said.

The VDMA represents around 3,500 companies in the machine building industry and counts Thyssenkrupp, Siemens Energy and Heidelberger Druckmaschinen among its members.

The comments come after the collapse of Silicon Valley Bank this month triggered a major sell-off in global banking stocks and eroded investor confidence, in the worst banking shock since the financial crisis 15 years ago.

Fears of contagion have also spread to Europe, where Switzerland's Credit Suisse had to be rescued by peer UBS and shares in Deutsche Bank have plunged.

"Generally, mechanical engineering as an industrial sector is highly dependent on a functioning financial sector, as it relies on investments and working capital loans to finance its production processes and innovations," Illner, who heads VDMA's Business Advisory, told Reuters in emailed comments.

"Therefore, we are watching the distortions in the financial sector very closely."

Whether an individual company was sufficiently funded to survive a financial crisis depended on several factors, including available cash, type and size of loans as well as how diversified businesses are, Illner said.

"However, we see the overall engineering sector as fairly robust, even if the banking crisis continues to worsen."

(Reporting by Christoph Steitz; Editing by Miranda Murray and Mark Potter)